Canada Trade Deficit Widens Less Than Forecast on Metals

Canada’s merchandise trade deficit was narrower than economists forecast in December as record exports of metals masked a decline in crude oil shipments.

The deficit of C$649 million ($519 million) followed a November shortfall that was revised to C$335 million from C$644 million, Statistics Canada said Thursday in Ottawa. Economists surveyed by Bloomberg forecast a December deficit of C$1.1 billion, based on the median of 15 forecasts.

Early signs of weakness in exports and business investment linked to crude oil’s drop below $50 a barrel from more than $100 last year triggered a surprise interest-rate cut on Jan. 21 from Bank of Canada Governor Stephen Poloz. Investors are betting on another rate reduction the next decision in March, with oil remaining below the $60 a barrel the central bank based its latest forecasts on, including that economic growth would slow to a 1.5 percent annual pace in the first half.

“We are leaning toward a rate cut in March still,” Robert Kavcic, a Bank of Montreal senior economist, said by telephone from Toronto. “We don’t have a read yet on how deep this slowdown is going to be in the first half.”

Canada’s dollar appreciated by 0.8 percent to C$1.2478 per U.S. dollar at 9:55 a.m. in Toronto. The currency closed at C$1.2732 per U.S. dollar on Jan. 30, the weakest since March 2009.

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Cenovus Energy Inc. said last month it will reduce spending this year by an additional 27 percent because of lower crude prices. The Calgary-based oil-sands producer now plans to spend C$1.8 billion to C$2 billion compared with an earlier target of C$2.5 billion to C$2.7 billion.

Imports also rose at the fastest pace since May, gaining 2.3 percent C$44.7 billion, Statistics Canada said. Energy imports rose 9.3 percent to C$3.48 billion as several refineries resumed full production after maintenance work, according to the agency, while the motor vehicle and parts category rose 3.3 percent to a record C$8.07 billion.

The volume of exports advanced 3.5 percent and import volumes rose 2.8 percent, Statistics Canada said. Volume figures adjust for price changes and can be a better indicator of how trade contributes to economic growth.

The surplus with the U.S. narrowed to C$3.12 billion in December from C$3.17 billion a month earlier. Exports make up about one-third of Canada’s economy, with about 75 percent of the shipments going to the U.S.

For all of last year Canada reported a trade surplus of C$5.2 billion, compared with a C$7.2 billion deficit in 2013, Statistics Canada said.